One of the most common mistakes that people make when planning for their financial future is not purchasing adequate insurance coverage. People often obsess about their investments and debt obligations, but forget that one catastrophic event could completely wipe out any financial plan that may have taken years to create.
Insurance coverage for your most important assets is crucially important to the financial planning process. Most financial planners like to start discussing the importance of life, health, and disability insurance. Much more fundamental than these types of insurance, however, is auto insurance.
Automobile accidents happen every single day. In fact, you probably know someone who has been involved in an automobile accident. What you may not know, however, is that every day there are lawsuits that take place resulting from accidents where drivers did not have adequate insurance coverage to protect themselves and others.
In order to protect yourself from potential catastrophe behind the wheel, there are three things you should always do when it comes to your car insurance:
Purchase high liability limits. The liability limits on your insurance policy pay for personal injury and damage to property of others. It is often recommended to purchase the highest liability limits you can afford. High liability limits help prevent you from paying any money out-of-pocket if you or anyone insured on your policy cause an accident that requires significant payments towards property repair or hospital bills. When a person needs to go to the hospital as result of an accident, $100,000 can add up pretty quickly.
Purchase pip insurance coverage. Personal Injury Protection (known as pip) is an insurance coverage that in most states will pay for injuries to people in the insured’s vehicle on a no-fault basis. This is an excellent coverage because pip insurance will cover anyone traveling in your car, regardless of fault and regardless whether or not they are listed on your auto insurance policy. So if you are driving 3 of your son’s friends to soccer practice and get in an accident, you can be confident that they will receive at least a moderate amount of medical protection if need be.
Protect your vehicles from all types of catastrophes. If you own vehicles that are worth a reasonable amount of money, it could really mess up a financial plan if you had to come out-of-pocket thousands of dollars to replace your vehicles. Both collision and comprehensive insurance are essential pieces to ensuring you don’t have to shell out large sums of money just to replace damaged property.
Making sure all your valuables are secure through adequate insurance is the start of any financial plan. Although discussed less frequently than health or life insurance, auto insurance is an essential part to your financial success, and implementing the recommendations above with help you begin the journey to securing your financial future.